Property returns sink to new lows
UK commercial property suffered the weakest single month of performance since December last year with a -2.4% return last month, taking its 12-month performance to -18.1%, its worst performance on record.
The IPD monthly property index, compiled by the Investment Property Databank, fell -2.4% last month, compared with a -1.1% fall in August.
On a rolling 12-month period the IPD index fell to a return of -18.1%, the worst on record. The negative return surpasses last month's figure of -16.1%. Previously, the worst annual return occured in April 1991 at -8.1%.
IPD said that all sectors recorded falls, with retail properties falling the most last month with a return of -2.6%. This was followed by the office sector, which fell -2.4% and industrial properties, which fell -1.9%. On a three-month rolling period, all property returns were down -4.8%.
Ian Cullen, co-founding director of IPD, said: "The charts indicate a second dip, but the underlying numbers reveal that if the first dip was yield rather than rent driven, we are not yet through the first. Not surprisingly, however, the signs of weakening occupier demand are now becoming clearly visible."
The falling property values has spawned several real estate recovery vehicles in the UK and abroad. In the UK, CBRE Finance set up a restructuring team to advise clients on dealing with their distressed assets.
And this week, UK-listed property consultant Savills set up a New York team to help real estate companies and their lenders with their liquidity needs.
John Lyons, who will jointly-lead the team, said: "There is definitely going to be work that comes through the government as well as borrowers and owners of real estate who need help working out their issues."
-- write to mturner@efinancialnews.com
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